Day-one gains fade fast: Study finds just 36% of new-age IPOs deliver long-term alpha

Only 36% of new-age IPOs deliver long-term alpha, according to a research report by multifamily office Client Associates, exposing the gap between market hype and business fundamentals.

As per the report, the six-month lock-in expiry proved to be the most rewarding exit window, with 52% of firms generating positive alpha during that period. By contrast, only 43% of companies rewarded pre-IPO investors with outperformance as of June 2025.

IPO investors, buoyed by an average subscription of 48.5x, enjoyed strong day-one gains, with 68% of listings posting an average 24.15% rise on debut. But these returns quickly fizzled, with only 36% sustaining long-term alpha. For post-IPO investors, the picture was bleaker still: just 32% of companies delivered positive alpha beyond listing, with IPO prices often proving to be valuation peaks rather than launchpads.

The report highlights the underperformance of the "retail frenzy subset" - 10 IPOs that drew extraordinary demand in unlisted or secondary markets. While a few, such as Zomato, PolicyBazaar, and Ixigo, maintained resilience, others like Paytm, Ola Electric, and Mobikwik fell far short of expectations. Pre-IPO investors in this group clocked an average return of -5% (compared to +45% for the broader universe), while IPO and post-IPO investors fared even worse at -6% and -25%, respectively.

The study, titled The New-Age IPO Performance Analysis, reviewed 25 IPOs across fintech, logistics, consumer internet, quick commerce, and SaaS that listed between May 2020 and June 2025, benchmarking outcomes across pre-IPO, IPO, and post-IPO stages against the BSE 500.

According to the study, companies with clear monetisation models, margin improvement, and scalable revenues consistently outperformed. Capital-light businesses such as Zomato and Nazara weathered market cycles far better than cash-guzzling, capital-heavy peers.

"India's startup IPO boom was driven more by narrative than numbers. While listing gains rewarded early risk-takers, long-term outperformance was reserved for companies built on solid fundamentals - capital-efficient growth, profitability, and disciplined execution," said Nitin Aggarwal, Director, Investment Research and Advisory at Client Associates.

The report argues that the exuberance of 2020-21, when liquidity and retail participation drove frothy valuations, has now given way to a more sober phase in 2024-25, where profitability, cash flows, and governance are emerging as the true investor benchmarks.

As per Client Associates, India's new-age IPO wave has created a handful of enduring success stories but has also left most investors with sub-par, risk-adjusted returns. As the country's capital markets mature, the shift from hype to discipline - and from FOMO to fundamentals - may well define the next phase of wealth creation.